PROKIDNEY CORP. 10-K

Item 9A . Controls and Procedures. Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934) as of December 31, 2023. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2023, our disclosure controls and procedures were effective in causing material information relating to us (including our consolidated subsidiaries) to be recorded, processed, summarized and reported by management on a timely basis and to ensure the quality and timeliness of our public disclosures with SEC disclosure obligations. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. 100 Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, with the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error and mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or because the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Management’s Annual Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those written policies and procedures that: • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles; • provide reasonable assurance that receipts and expenditures are being made only in accordance with management and director authorization; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. Management based this assessment on criteria described in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management determined that as of December 31, 2023, we maintained effective internal control over financial reporting. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Website Availability of Reports and other Corporate Governance Information The Company maintains a comprehensive corporate governance program, including Corporate Governance Guidelines for its Board of Directors, Board Guidelines for Assessing Director Independence and charters for its Audit Committee, Nominating and Corporate Governance Committee and Talent and Compensation Committee. The Company maintains a corporate website, www.prokidney.com, where stockholders and other interested persons may review, without charge, among other things, corporate governance materials and certain SEC filings, which are generally available on the same business day as the filing date with the SEC on the SEC’s website http://www.sec.gov. The contents of our website are not made a part of this Annual Report. Item 9B . Other Information. Not applicable. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 101 PA RT III Item 10 . Directors, Executive Officers and Corporate Governance. The information required by this item is incorporated by reference from the discussion responsive thereto under the headings “Management and Corporate Governance,” “Delinquent Section 16(a) Reports,” and “Code of Ethics and Business Conduct” in our Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023. If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2023, the information required by this item will be contained in the Form 10-K/A. Item 11 . Executive Compensation. The information required by this item is incorporated by reference from the discussion responsive thereto under the heading “Executive Officer and Director Compensation” in our Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023. If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2023, the information required by this item will be contained in the Form 10-K/A. Item 12 . Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this item is incorporated by reference from the discussion responsive thereto under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023. If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2023, the information required by this item will be contained in the Form 10-K/A. Item 13 . Certain Relationships and Related Transactions, and Director Independence. The information required by this item is incorporated by reference from the discussion responsive thereto under the headings “Certain Relationships and Related Party Transactions” and “Management and Corporate Governance” in our Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023. If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2023, the information required by this item will be contained in the Form 10-K/A. Item 14 . Principal Accounting Fees and Services. The information required by this item is incorporated by reference from the discussion responsive thereto under the heading “Ratification of Selection of Independent Registered Public Accounting Firm” in our Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023. If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2023, the information required by this item will be contained in the Form 10-K/A. 102 PART IV Item 15 . Exhibits and Financial Statement Schedules. (a)(1) Financial Statements The following documents are included on pages F-1 through F-26 attached hereto and are filed as part of this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets as of December 31, 2023 and 2022 F- 3 Consolidated Statements of Operations for the years ended December 31, 2023, 2022, and 2021 F- 4 Consolidated Statements of Comprehensive Loss for the years ended December 31, 2023, 2022, and 2021 F- 5 Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’ Deficit / Members’ Equity for the years ended December 31, 2023, 2022, and 2021 F- 6 Consolidated Statements of Cash Flows for the Years ended December 31, 2023, 2022, and 2021 F- 10 Notes to Consolidated Financial Statements F- 11 (a)(2) Financial Statement Schedules Not Applicable. (a)(3) List of Exhibits Exhibit Number Description 2.1 Business Combination Agreement, dated as of January 18, 2022, by and between ProKidney Corp. (formerly known as Social Capital Suvretta Holdings Corp. III) and ProKidney LP. (incorporated by reference from Exhibit 2.1 to Form 8-K filed with the SEC on January 21, 2022) (File No. 001-40560). 2.2 New GP Joinder, dated as of June 7, 2022 (incorporated by reference from Exhibit 2.2 to Form 8-K filed with the SEC on July 15, 2022) (File No. 001-40560). 3.1 Second Amended & Restated Memorandum and Articles of Association of ProKidney Corp. (incorporated by reference from Exhibit 3.1 to Form 8-K filed with the SEC on July 15, 2022) (File No. 001-40560). 4.1* Description of registered securities 10.1 Tax Receivable Agreement, dated as of July 11, 2022, by and among ProKidney Corp. (formerly known as Social Capital Suvretta Holdings Corp. III), the TRA Party Representative (as defined therein) and the TRA Parties (as defined therein) (incorporated by reference from Exhibit 10.1 to Form 8-K filed with the SEC on July 15, 2022) (File No. 001-40560). 10.2 Exchange Agreement, dated as of July 11, 2022, by and among ProKidney Corp. (formerly known as Social Capital Suvretta Holdings Corp. III), ProKidney LP, acting through its general partner ProKidney Corp. GP Limited, and certain holders named therein (incorporated by reference from Exhibit 10.2 to Form 8-K filed with the SEC on July 15, 2022) (File No. 001-40560). 10.3 Lock-up Agreement, dated as of July 11, 2022, by and among ProKidney Corp. (formerly known as Social Capital Suvretta Holdings Corp. III), SCS Sponsor III LLC, the Sponsor Key Holders (as defined therein) and the ProKidney Holders (as defined therein) (incorporated by reference from Exhibit 10.3 to Form 8-K filed with the SEC on July 15, 2022) (File No. 001-40560). 10.4 Amended and Restated Registration Rights Agreement, dated as of July 11, 2022, by and among ProKidney Corp. (formerly known as Social Capital Suvretta Holdings Corp. III), SCS Sponsor III LLC, the ProKidney Holders (as defined therein), Marc Semigran, Uma Sinha, Sukumar Nagendran, David Spiegel and the Investor Stockholders (as defined therein) (incorporated by reference from Exhibit 10.4 to Form 8-K filed with the SEC on July 15, 2022) (File No. 001-40560). 10.5* Second Amended and Restated Limited Partnership Agreement for a Limited Partnership Called ProKidney LP, dated as of July 11, 2022, as amended as of November 14, 2023, by and among Tolerantia, LLC, Control Empresarial de Capitales, S.A. de C.V., ProKidney Management Equity LLC, ProKidney Corp. (formerly known as Social Capital Suvretta Holdings Corp. III), ProKidney Corp. GP Limited and ProKidney GP Limited. 103 10.6 Form of Subscription Agreement for Institutional Investors, dated as of January 18, 2022, by and between ProKidney Corp. (formerly known as Social Capital Suvretta Holdings Corp. III) and the subscriber partiers thereto (incorporated by reference from Exhibit 10.1 to Form 8-K/A filed with the SEC on January 21, 2022) (File No. 001-40560). 10.7 Form of Subscription Agreement for Individual Investors, dated as of January 18, 2022, by and between ProKidney Corp. (formerly known as Social Capital Suvretta Holdings Corp. III) and the subscriber parties thereto (incorporated by reference from Exhibit 10.2 to Form 8-K/A filed with the SEC on January 21, 2022) (File No. 001-40560). 10.8 Sponsor Support Agreement, dated as of January 18, 2022, by and among ProKidney Corp. (formerly known as Social Capital Suvretta Holdings Corp. III), SCS Sponsor III LLC, ProKidney LP and the directors and officers named therein (incorporated by reference from Exhibit 10.3 to Form 8-K/A filed with the SEC on January 21, 2022) (File No. 001-40560). 10.9 Company Unitholder Support Agreement, dated as of January 18, 2022, by and among ProKidney Corp. (formerly known as Social Capital Suvretta Holdings Corp. III), ProKidney LP and the persons named therein (incorporated by reference from Exhibit 10.10 to Form 8-K filed with the SEC on July 15, 2022) (File No. 001-40560). 10.10 ProKidney Corp. 2022 Incentive Equity Plan (incorporated by reference from Exhibit 10.11 to Form 8-K filed with the SEC on July 15, 2022) (File No. 001-40560). 10.11 ProKidney Corp. Employee Stock Purchase Plan (incorporated by reference from Exhibit 10.12 to Form 8-K filed with the SEC on July 15, 2022) (File No. 001-40560). 10.12 Form of Indemnification Agreement, dated as of July 11, 2022, by and among ProKidney Corp. and its directors and executive officers (incorporated by reference from Exhibit 10.13 to Form 8-K filed with the SEC on July 15, 2022) (File No. 001-40560). 10.13† Employment Agreement, dated as of December 3, 2022 by and between James Coulston and ProKidney, LLC (incorporated by reference from Exhibit 10.14 to Form 10-K filed with the SEC on March 28, 2023) (File No. 001-40560). 10.14† Form of Director Stock Option Award (incorporated by reference from Exhibit 10.17 to Form 10-K filed with the SEC on March 28, 2023) (File No. 001-40560). 10.15† Form of Employee Incentive Stock Option Award (incorporated by reference from Exhibit 10.18 to Form 10-K filed with the SEC on March 28, 2023) (File No. 001-40560). 10.16† ProKidney Corp. 2022 Director Compensation Policy (incorporated by reference from Exhibit 10.20 to Form 10-K filed with the SEC on March 28, 2023) (File No. 001-40560). 10.17† ProKidney Short Term Incentive Performance Plan (incorporated by reference from Exhibit 10.1 to Form 8-K filed with the SEC on January 19, 2023) (File No. 001-40560). 10.18† Employment Agreement, dated December 3, 2023, by and between ProKidney, LLC and Bruce Culleton. (incorporated by reference from Exhibit 10.1 to Form 8-K/A filed with the SEC on December 5, 2023) (File No. 001-40560). 10.19 Master Services Agreement, dated February 15, 2021, by and between George Clinical PTY Limited and ProKidney (formerly RegenMed (Cayman) Ltd.) (incorporated by reference from Exhibit 10.13 to Form S-1 filed with the SEC on August 9, 2022) (File No. 333-266683). 10.20 Research, Development, Engineering Services and License Memorandum and Agreement, dated January 16, 2022, by and between ProKidney (formerly RegenMed (Cayman) Ltd.) and DEKA Products Limited Partnership (incorporated by reference from Exhibit 10.14 to Form S-1 filed with the SEC on August 9, 2022) (File No. 333-266683) . 10.21 Master Agreement for Clinical Trials Services, dated April 2, 2020, by and between ProKidney (formerly RegenMed (Cayman) Ltd.) and Frenova, LLC (incorporated by reference from Exhibit 10.16 to Form S-1 filed with the SEC on August 9, 2022) (File No. 333-266683) . 10.22 Master Services Agreement, dated May 1, 2019, by and between PPD Development, LP and ProKidney (formerly RegenMed (Cayman) Ltd.) (incorporated by reference from Exhibit 10.17 to Form S-1 filed with the SEC on August 9, 2022) (File No. 333-266683) . 10.23 Master Services Agreement, dated August 14, 2015, by and between CTI Clinical Trial Services Inc. and RegenMedTX, LLC (incorporated by reference from Exhibit 10.18 to Form S-1 filed with the SEC on August 9, 2022) (File No. 333-266683). 10.24 Laboratory Service Agreement, dated August 16, 2016, by and among Covance Central Laboratory Services LP, Covance Central Laboratory Services SA` RL and ProKidney (formerly RegenMed (Cayman) Ltd.) (incorporated by reference from Exhibit 10.19 to Form S-1 filed with the SEC on August 9, 2022) (File No. 333-266683). 104 10.25 Laboratory Service Agreement, dated August 1, 2017, by and among Covance Central Laboratory Services LP, Covance Central Laboratory Services SA` RL and ProKidney (formerly RegenMed (Cayman) Ltd.) (incorporated by reference from Exhibit 10.20 to Form S-1 filed with the SEC on August 9, 2022) (File No. 333-266683). 10.26 Laboratory Service Agreement, dated June 21, 2019, by and among Covance Central Laboratory Services LP, Covance Central Laboratory Services SA` RL and ProKidney (formerly RegenMed (Cayman) Ltd.) (incorporated by reference from Exhibit 10.21 to Form S-1 filed with the SEC on August 26, 2022) (File No. 333-266683). 10.27 Laboratory Service Agreement, dated September 16, 2021, by and among Labcorp Central Laboratory Services LP, Labcorp Central Laboratory Services SA` RL and ProKidney (formerly RegenMed (Cayman) Ltd.) (incorporated by reference from Exhibit 10.22 to Form S-1 filed with the SEC on August 26, 2022) (File No. 333-266683). 10.28 Consulting Services Agreement, dated as of January 1, 2020 between ProKidney (formerly known as RegenMed (Cayman) Ltd. (d/b/a inRegen)) and Nefro Health (incorporated by reference from Exhibit 10.30 to Form 10-K filed with the SEC on March 28, 2023) (File No. 001-40560) 10.29 Consulting Services Agreement, dated as of January 1, 2020 between ProKidney, LLC (formerly known as Twin City Bio LLC) and Nefro Health (incorporated by reference from Exhibit 10.31 to Form 10-K filed with the SEC on March 28, 2023) (File No. 001-40560). 10.30 Purchase Agreement, as amended, dated March 29, 2023, by and among ProKidney Corp. and 73 BCI 2 LLC. (incorporated by reference from Exhibit 10.1 to Form 10-Q filed with the SEC on August 10, 2023) (File No. 001-40560). 10.31 Assignment and Assumption of Purchase and Sale Agreement, dated July 17, 2023, by and among ProKidney Corp. and ProKidney Acquisition Company, LLC. (incorporated by reference from Exhibit 10.2 to Form 10-Q filed with the SEC on August 10, 2023) (File No. 001-40560). 10.32 Open Market Sale Agreement SM, dated January 19, 2024, by and between ProKidney Corp. and Jefferies LLC (incorporated by reference from Exhibit 1.1 to Form 8-K filed with the SEC on January 19, 2024) (File No. 001-40560). 21.1* Subsidiaries of the Registrant 23.1* Consent of Ernst & Young LLP 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97* ProKidney Corp. Clawback Policy 101* The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Stockholders’ Deficit, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags. 104* The cover page from this Annual Report on Form 10-K for the year ended December 31, 2023, formatted in Inline XBRL. † Management contract or compensatory plan or arrangement * Filed herewith. Item 16 . Form 10-K Summary None. 105 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . PROKIDNEY CORP. Date: March 21, 2024 By: /s/ Bruce Culleton Bruce Culleton Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Bruce Culleton Chief Executive Officer and Director March 21, 2024 Bruce Culleton (Principal Executive Officer) /s/ James Coulston Chief Financial Officer March 21, 2024 James Coulston (Principal Financial and Accounting Officer) /s/ Pablo Legorreta Chairman March 21, 2024 Pablo Legorreta /s/ William F. Doyle Director March 21, 2024 William F. Doyle /s/ Jennifer Fox Director March 21, 2024 Jennifer Fox /s/ José Ignacio Jimenez Santos Director March 21, 2024 José Ignacio Jimenez Santos /s/ Alan M. Lotvin, M.D. Director March 21, 2024 Alan M. Lotvin, M.D. /s/ John M. Maraganore, Ph.D. Director March 21, 2024 John M. Maraganore, Ph.D. /s/ Brian J.G. Pereira, M.D. Director March 21, 2024 Brian J.G. Pereira, M.D. /s/ Uma Sinha, Ph.D. Director March 21, 2024 Uma Sinha, Ph.D. 106 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID:42) F- 2 Consolidated Balance Sheets as of December 31, 2023 and 2022 F- 3 Consolidated Statements of Operations for the years ended December 31, 2023, 2022, and 2021 F- 4 Consolidated Statements of Comprehensive Loss for the years ended December 31, 2023, 2022, and 2021 F- 5 Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’ Deficit / Members’ Equity for the years ended December 31, 2023, 2022, and 2021 F- 6 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022, and 2021 F- 10 Notes to Consolidated Financial Statements F- 11 F- 1 Rep ort of Independent Registered Public Accounting Firm To the Shareholders and the Board of ProKidney Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of ProKidney Corp. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, changes in redeemable noncontrolling interest and shareholders’ deficit / members’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2019. Raleigh, North Carolina March 21, 2024 F- 2 ProKidney Corp. Consolidated Balance Sheets (in thousands, except share data) December 31, 2023 December 31, 2022 Assets Cash and cash equivalents $ 60,649 $ 490,252 Marketable securities 302,301 – Interest receivable 1,375 – Prepaid assets 3,399 2,624 Prepaid clinical 6,413 10,459 Other current assets 9 1,384 Total current assets 374,146 504,719 Fixed assets, net 42,143 10,708 Right of use assets, net 4,263 2,356 Intangible assets, net – 213 Total assets $ 420,552 $ 517,996 Liabilities and Shareholders' Deficit/Members' Equity Accounts payable $ 5,098 $ 3,044 Lease liabilities 803 493 Accrued expenses and other 17,665 7,336 Income taxes payable 1,472 – Total current liabilities 25,038 10,873 Income tax payable, net of current portion 568 278 Lease liabilities, net of current portion 3,610 1,906 Total liabilities 29,216 13,057 Commitments and contingencies Redeemable noncontrolling interest 1,494,732 1,601,555 Shareholders’ deficit / members' equity: Class A ordinary shares, $ 0.0001 par value; 500,000,000 shares authorized; 59,880,347 and 61,540,231 issued and outstanding as of December 31, 2023 and December 31, 2022, respectively 6 6 Class B ordinary shares, $ 0.0001 par value; 500,000,000 shares authorized; 168,297,916 and 171,578,320 issued and outstanding as of December 31, 2023 and December 31, 2022, respectively 17 18 Additional paid-in capital 36,114 7,476 Accumulated other comprehensive loss 130 – Accumulated deficit ( 1,139,663 ) ( 1,104,116 ) Total shareholders' deficit / members’ equity ( 1,103,396 ) ( 1,096,616 ) Total liabilities and shareholders' deficit/members' equity $ 420,552 $ 517,996 The accompanying notes are an integral part of these consolidated financial statements. F- 3 ProKidney Corp. Consolidated Statements of Operations (in thousands, except for share and per share data) 2023 2022 2021 Operating expenses Research and development $ 106,707 $ 82,070 $ 46,255 General and administrative 44,815 70,937 8,855 Total operating expenses 151,522 153,007 55,110 Operating loss ( 151,522 ) ( 153,007 ) ( 55,110 ) Other income (expense): Interest income 22,083 5,983 2 Interest expense ( 12 ) ( 215 ) – Net loss before income taxes ( 129,451 ) ( 147,239 ) ( 55,108 ) Income tax expense 5,996 896 38 Net loss before noncontrolling interest ( 135,447 ) ( 148,135 ) ( 55,146 ) Net loss attributable to noncontrolling interest ( 99,979 ) ( 40,103 ) – Net loss available to Class A ordinary shareholders $ ( 35,468 ) $ ( 108,032 ) $ ( 55,146 ) Weighted average Class A ordinary shares outstanding: (1) Basic and diluted 61,714,225 61,540,231 Net loss per share attributable to Class A ordinary shares: (1) Basic and diluted $ ( 0.57 ) $ ( 0.23 ) (1) For the year ended December 31, 2022, net loss per Class A ordinary share and weighted average Class A ordinary shares outstanding reflects the period from July 11, 2022 through December 31, 2022, the period following the Business Combination, as defined in Note 1. For more information refer to Note 9. The accompanying notes are an integral part of these consolidated financial statements. F- 4 ProKidney Corp. Consolidated Statements of Comprehensive Loss (in thousands, except for share and per share data) Years Ended December 31, 2023 2022 2021 Net loss including noncontrolling interest $ ( 135,447 ) $ ( 148,135 ) $ ( 55,146 ) Other comprehensive income: Unrealized gain on marketable securities 497 – – Other comprehensive income 497 – – Total comprehensive loss including noncontrolling interest ( 134,950 ) ( 148,135 ) ( 55,146 ) Less: Total comprehensive loss attributable to noncontrolling interest ( 99,612 ) ( 40,103 ) – Total comprehensive loss attributable to Class A ordinary shareholders $ ( 35,338 ) $ ( 108,032 ) $ ( 55,146 ) The accompanying notes are an integral part of these consolidated financial statements. F- 5 ProKidney Corp. Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’ Deficit / Members’ Equity (in thousands, except for share and per share data) F- 6 For the Years Ended December 31, 2023 Class A Units Class B Units Class A Ordinary Shares Class B Ordinary Shares Redeemable Noncontrolling Interest Units Amount Profits Interests Shares Amount Shares Amount Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shareholders' Deficit / Members' Equity Balance as of December 31, 2020 $ – 115,000,000 $ 115,000 $ 1,228 $ – $ – $ – $ – $ – $ – $ ( 106,364 ) $ 9,864 Capital contribution – 71,500,000 71,500 – – – – – – – – 71,500 Equity-based compensation – – – 699 – – – – – – – 699 Net loss – – – – – – – – – – ( 55,146 ) ( 55,146 ) Balance as of December 31, 2021 – 186,500,000 186,500 1,927 – – – – – – ( 161,510 ) 26,917 Capital contribution – – – 6,050 – – – – – – – 6,050 Equity-based compensation / payments prior to Business Combination – – – 63,667 – – – – – – – 63,667 Net loss prior to the Business Combination – – – – – – – – – – ( 93,632 ) ( 93,632 ) Effect of the Business Combination, including net proceeds of shares sold through the PIPE transaction 1,635,829 ( 186,500,000 ) ( 186,500 ) ( 71,644 ) 61,540,231 6 170,723,961 18 – – ( 834,574 ) ( 1,092,694 ) Equity-based compensation after the Business Combination 6,150 – – – – – – – 7,155 – – 7,155 F- 7 Vesting of Class B restricted stock rights – – – – – – 854,359 – – – – – Impact of equity transactions on redeemable noncontrolling interest ( 321 ) – – – – – – – 321 – – 321 Net loss after the Business Combination ( 40,103 ) – – – – – – – – – ( 14,400 ) ( 14,400 ) Balance as of December 31, 2022 1,601,555 – – – 61,540,231 6 171,578,320 18 7,476 – ( 1,104,116 ) ( 1,096,616 ) Equity-based compensation 7,005 – – – – – – – 23,841 – – 23,841 Issuance of Class A ordinary shares – – – 50,000 – – – – – – – Vesting of Class B restricted stock rights – – – – – – 2,266,079 – – – – – Exchange of Class B ordinary shares for Class A ordinary shares ( 9,500 ) – – – 5,546,483 1 ( 5,546,483 ) ( 1 ) 9,500 – – 9,500 Repurchase of Class A ordinary shares – – – – ( 7,256,367 ) ( 1 ) – – ( 9,498 ) – – ( 9,499 ) Impact of equity transactions on redeemable noncontrolling interest ( 4,795 ) – – – – – – – 4,795 – – 4,795 Unrealized loss on marketable securities 367 – – – – – – – – 130 – 130 Net loss ( 99,979 ) – – – – – – – – – ( 35,468 ) ( 35,468 ) F- 8 Change in redemption value of noncontrolling interest 79 – – – – – – – – – ( 79 ) ( 79 ) Balance as of December 31, 2023 $ 1,494,732 – $ – $ – 59,880,347 $ 6 168,297,916 $ 17 $ 36,114 $ 130 $ ( 1,139,663 ) $ ( 1,103,396 ) The accompanying notes are an integral part of these consolidated financial statements. F- 9 ProKidney Corp. Consolidated Statements of Cash Flows (in thousands) Years Ended December 31, 2023 2022 2021 Cash flows from operating activities Net loss before noncontrolling interest $ ( 135,447 ) $ ( 148,135 ) $ ( 55,146 ) Adjustments to reconcile net loss before noncontrolling interest to net cash flows used in operating activities: Depreciation and amortization 3,853 3,036 1,984 Equity-based compensation 30,846 74,469 699 Gain on marketable securities, net ( 6,018 ) – – Loss on disposal of equipment 23 – – Changes in operating assets and liabilities Interest receivable ( 1,375 ) – – Prepaid and other assets 4,648 ( 7,231 ) ( 5,704 ) Accounts payable and accrued expenses 11,639 494 7,868 Income taxes payable 1,762 278 – Net cash flows used in operating activities ( 90,069 ) ( 77,089 ) ( 50,299 ) Cash flows used in investing activities Proceeds from sale of equipment – – 1 Net cash from SCS – 108 – Purchases of marketable securities ( 471,604 ) – – Sales of marketable securities 175,818 – – Purchase of equipment and facility expansion ( 34,197 ) ( 1,846 ) ( 5,192 ) Net cash flows used in investing activities ( 329,983 ) ( 1,738 ) ( 5,191 ) Cash flows from financing activities Payments on finance leases ( 52 ) ( 32 ) ( 30 ) Proceeds from Business Combination, including PIPE financing, net of associated costs of $ 37,856 – 542,503 – Borrowings under related party notes payable – 35,000 – Repurchase of Class A ordinary shares ( 9,499 ) – – Repayment of related party notes payable – ( 35,000 ) – Net cash contribution – 6,050 71,500 Net cash flows (used in) provided by financing activities ( 9,551 ) 548,521 71,470 Net change in cash and cash equivalents ( 429,603 ) 469,694 15,980 Cash, beginning of period 490,252 20,558 4,578 Cash, end of period $ 60,649 $ 490,252 $ 20,558 Supplemental cash flow information: Cash paid during the period for income taxes, net of refunds $ 2,857 $ 1,950 $ 68 Supplemental disclosure of non-cash investing and financing activities: Right of use assets obtained in exchange for lease obligations $ 2,594 $ 1,491 $ – Exchange of Class B ordinary shares $ 9,500 $ – $ – Impact of equity transactions and compensation on redeemable noncontrolling interest $ 2,577 $ 5,828 $ – Change in redemption value of noncontrolling interest $ 79 $ – Equipment and facility expansion included in accounts payable and accrued expenses $ 218 $ 51 $ 1,295 The accompanying notes are an integral part of these consolidated financial statements. F- 10 ProKidney Corp. Notes to Consolidated Financial Statements Note 1: Description of Business and Basis of Presentation Description of Business ProKidney Corp. (the “Company” or “ProKidney”) was originally incorporated as Social Capital Suvretta Holdings Corp. III (“SCS”). SCS was a blank check company incorporated as a Cayman Islands exempted company on February 25, 2021 . SCS was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. On January 18, 2022, SCS executed a definitive business combination agreement (the “Business Combination Agreement”), with ProKidney LP (“PKLP”), a limited partnership under the laws and regulations of Ireland. Pursuant to the terms of the Business Combination Agreement, PKLP became a subsidiary of SCS and was organized in an umbrella partnership corporation (“Up-C”) structure, which would provide potential future tax benefits for SCS when the equity holders ultimately exchanged their pass-through interests for Class A ordinary shares. The transaction closed (the “Closing”) on July 11, 2022 (the “Closing Date”). Upon consummation of the transaction, SCS changed its name to ProKidney Corp. The business combination between SCS and PKLP (the “Business Combination”) resulted in gross proceeds of approximately $ 596,537,000 . This amount reflected a contribution of $ 21,737,000 of cash held in SCS’ trust account, net of redemptions, and a $ 574,800,000 concurrent private placement of Class A ordinary shares of the combined company, priced at $ 10.00 per share (the “PIPE Placement”). Upon close, these proceeds were used to repay the outstanding balance of $ 35,000,000 under PKLP’s two promissory note agreements with certain holders of its Class A Units (the “Promissory Notes”) and related accrued interest. Additionally, the proceeds were used to pay those expenses previously incurred by SCS related to the Business Combination of approximately $ 21,029,000 as well as advisory and placement fees of approximately $ 29,389,000 incurred in connection with the PIPE Placement. The Business Combination was accounted for as a reverse recapitalization transaction between entities under common control, through which PKLP was considered the accounting acquiror and predecessor entity. The Business Combination was reflected as the equivalent of PKLP issuing stock for the net assets of SCS accompanied by a recapitalization with no goodwill or intangible assets recognized. ProKidney Corp., through its operating subsidiaries, ProKidney, which is incorporated under the Cayman Islands Companies Act (as amended) as an exempted company (“ProKidney-KY”) and ProKidney LLC, a limited liability company under the laws of Delaware (“ProKidney-US”) is focused on the development of its Renal Autologous Cell Therapy (rilparencel), which has the potential to preserve kidney function in patients with chronic kidney disease or delay or eliminate the need for dialysis and organ transplantation. Principles of Consolidation ProKidney Corp. is a holding company, and its principal asset is a controlling equity interest in PKLP and its wholly-owned operating subsidiaries ProKidney-KY and ProKidney-US. The Company has determined that PKLP is a variable-interest entity for accounting purposes and that ProKidney is the primary beneficiary of PKLP because (through its managing member interest in PKLP and the fact that the senior management of ProKidney is also the senior management of PKLP) it has the power and benefits to direct all of the activities of PKLP, which include those that most significantly impact PKLP’s economic performance. The Company has therefore consolidated PKLP’s results pursuant to Accounting Standards Codification Topic 810, “Consolidation” in its Consolidated Financial Statements. As of December 31, 2023 , various holders own non-voting interests in PKLP, representing a 73.8 % economic interest in PKLP, effectively restricting ProKidney’s interest to 26.2 % of PKLP’s economic results, subject to increase in the future, should ProKidney purchase additional non-voting common units (“PKLP Units”) of PKLP, or should the holders of PKLP Units decide to exchange such units (together with shares of Class B ordinary shares) for Class A ordinary shares (or cash) pursuant to the Exchange Agreement (as defined in Note 6). The Company will not be required to provide financial or other support for PKLP. However, ProKidney will control its business and other activities through its ownership of 100 % of the shares in ProKidney Corp. GP Limited (“New GP”), which is the managing member of PKLP. Nevertheless, because ProKidney will have no material assets other than its interests in PKLP and its subsidiaries, any financial difficulties at PKLP could result in ProKidney recognizing a loss. All intercompany transactions and balances have been eliminated. F- 11 Reclassifications To facilitate comparison of information across periods, certain reclassifications have been made to prior period amounts to conform to the current period’s presentation. Note 2: Significant Accounting Policies Use of Estimates The preparation of consolidated financial statements, in accordance with GAAP, requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements, and the amounts of expenses during the reported periods. Certain estimates in these consolidated financial statements have been made in connection with the calculation of research and development expenses, equity-based compensation expense and the provision for or benefit from income taxes. The Company bases its estimates on historical experience and various other assumptions, including in certain circumstances future projections, which management believes to be reasonable under the circumstances. Actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known. Cash Equivalents and Marketable Securities The Company considers all highly liquid investments with an original maturity of 90 days or less on the date of purchase to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these items. The Company’s investments in marketable debt securities have been classified and accounted for as available-for-sale. The Company classifies its marketable debt securities as short-term due to its availability for use in its current operations. The cost of securities sold is determined using the specific identification method. The Company considers all available evidence to evaluate if a credit loss exists, and if so, recognizes an allowance for credit loss. Concentrations of Credit Risk Cash and equivalents are the primary financial instruments held by the Company that are potentially subject to concentrations of credit risk. The Company’s cash and equivalents are deposited in accounts at large financial institutions, and such amounts may exceed federally insured limits. Accrued Expenses Accrued expenses as presented in the Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022 consisted of the following (in thousands): December 31, 2023 December 31, 2022 Compensation $ 5,237 $ 3,355 Severance 2,283 $ – Clinical study related costs 1,658 1,636 Facility related costs 693 – Accrued legal costs 1,015 436 Manufacturing improvement costs 4,365 678 Accrued consulting and professional fees 878 1,210 Other accrued expenses 1,536 21 Total accrued expenses and other $ 17,665 $ 7,336 Research and Development Costs Research and development costs are expensed as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities, including salaries, benefits, third party license fees, and external costs of outside vendors engaged to conduct manufacturing and preclinical development activities and clinical trials. The Company records accruals based on estimates of services received, efforts expended, and amounts owed pursuant to contracts with numerous contract research organizations. In the normal course of business, the Company contracts with third parties to perform various clinical study activities in the ongoing development of potential products. The financial terms of these agreements are subject to negotiation and variation from contract to contract and may result in uneven payment flows. Payments under the contracts F- 12 depend on factors such as the achievement of certain events and the completion of portions of the clinical study or similar conditions. The objective of the Company’s accrual policy is to match the recording of expenses in its financial statements to the actual services received and efforts expended. As such, expense accruals related to clinical studies are recognized based on the company’s estimate of the degree of completion of the event or events specified in the specific clinical study. The Company records nonrefundable advance payments it makes for future research and development activities as prepaid expenses. Prepaid expenses are recognized as expense in the Consolidated Statement of Operations and Comprehensive Loss as the Company receives the related goods or services Costs incurred in obtaining technology licenses are charged to research and development expense as purchased in-process research and development if the technology licensed has not reached technological feasibility and has no alternative future use. Fixed Assets Fixed assets are stated at cost, less accumulated depreciation. Generally, expenditures for maintenance and repairs are charged to expense and major improvements or replacements are capitalized. The Company computes depreciation and amortization using the straight-line method over the estimated useful life of the asset. Leasehold improvements are amortized over the lesser of, the life of the lease or the estimated useful life of the leasehold improvement. The estimated useful lives are as follows: Buildings 25 - 30 years Computer equipment and software 3 - 5 years Furniture and equipment 5 - 7 years Leasehold improvements remainder of lease term Fixed assets consisted of the following (in thousands): December 31, 2023 December 31, 2022 Land $ 3,067 $ – Buildings 22,490 – Leasehold improvements 10,950 10,537 Furniture and equipment 3,690 2,376 Computer equipment and software 847 889 Construction in progress 8,741 1,614 Less: accumulated depreciation ( 7,642 ) ( 4,708 ) Total fixed assets, net $ 42,143 $ 10,708 Depreciation expense for the years ended December 31, 2023, 2022 and 2021 was $ 2,956,000 , $ 2,448,000 , and $ 1,452,000 , respectively. Intangible Assets Intangible assets are comprised of acquired assembled workforce, which are accounted for in accordance with ASC 350 - Intangibles - Goodwill and Other. The acquired assembled workforce is amortized on a straight-line basis over the useful life of five years. The following table summarizes information related to the Company’s assembled workforce intangible asset (in thousands): December 31, 2023 December 31, 2022 Gross carrying amount $ 1,073 $ 1,073 Accumulated amortization 1,073 860 Net carrying amount $ — $ 213 Amortization expense relating to the assembled workforce intangible asset was $ 213,000 , $ 215,000 and $ 214,000 for the years ended December 31, 2023, 2022 and 2021 , respectively. Impairment of Long-Lived Assets Long-lived assets such as fixed assets and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to F- 13 be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. No impairment charges have been recorded for the years ended December 31, 2023, 2022 and 2021 . Income Taxes The Company uses the liability method in accounting for income taxes as required by ASC Topic 740 — Income Taxes, under which deferred tax assets and liabilities are recorded for the future tax consequences attributable to the differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, available taxes in the carryback periods, projected future taxable income and tax planning strategies in making this assessment. Accordingly, the Company has provided a full valuation allowance to offset the net deferred tax assets at December 31, 2023 and December 31, 2022. Interest and penalties related to income taxes are included in the benefit (expense) for income taxes in the Company’s Consolidated Statements of Operations. The Company has not incurred any significant interest or penalties related to income taxes in any of the periods presented. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three‑level fair value hierarchy that prioritizes the inputs used to measure fair value is described below. The three levels of inputs used to measure fair value are as follows: • Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities • Level 2 – Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable through correlation with market data • Level 3 – Unobservable inputs that are supported by little or no market data, which require the reporting entity to develop its own assumptions For assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets and liabilities where there exists limited or no observable market data are based primarily upon estimates and are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors. Therefore, fair value measurements cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the calculated current or future fair values. The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The carrying values of cash equivalents, accounts payable, and accrued liabilities approximate fair value due to the short‑term nature of these instruments. Leases The Company determines if an arrangement is a lease at inception. Balances recognized related to the Company’s operating and finance leases are included in right-of-use assets, net and lease liabilities in the Consolidated Balance Sheets. Right of use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Variable payments directly related to the use of the assets and future adjustments of payments based on indices are recognized in the period of incurrence or change and are not included in the lease payments at the initial measurement date. Lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise the option. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The right of use asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company has elected a practical expedient to not separate its lease and non-lease components and instead account for them as a single lease component. Leases with a term of 12 months or less are not recorded on the balance sheet. F- 14 Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Lease payments for short-term leases are recorded to operating expense on a straight-line basis and variable lease payments are recorded in the period in which the obligation for those payments is incurred. Contingent Liabilities The Company records reserves for contingent liabilities when it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements, and the amount of the loss can be reasonably estimated. Equity-Based Compensation Compensation expense for share-based compensation awards issued is based on the fair value of the award at the date of grant. The Company records forfeitures of share-based compensation awards as they occur. The Company’s share based compensation program grants awards that have included the following: 1) profits interests in ProKidney LP which, at close of the Business Combination, were converted into paired interests consisting of (i) Class B ordinary shares or Class B restricted stock rights and (ii) Common Units or Restricted Common Units of ProKidney LP (collectively referred to as “Legacy Profits Interests”); 2) restricted stock units issued by SCS (“Legacy SCS Awards”); 3) time-vested stock options issued by ProKidney Corp.; and 4) market-vested stock options issued by ProKidney Corp. The grant date fair value of time-vested stock option awards is estimated using the Black-Scholes option pricing formula. The grant date fair values of the Legacy Profits Interests and Legacy SCS Awards are based on the market value of the issuer’s shares or member units, as applicable, on the date of grant. Compensation expense related to time-vested stock options, Legacy Profits Interests and Legacy SCS Awards are recognized on a straight-line basis over the applicable service period. The grant date fair value of market-vested stock option awards is estimated using the Geometric Brownian Motion/Monte Carlo model. Share-based compensation expense related to these awards is recognized ratably for each vesting tranche over the derived service period regardless of whether the award achieves the market condition and will only be adjusted to the extent the service condition is not met. Due to the lack of sufficient historical trading information with respect to its own shares, the Company estimates expected volatility based on the historical volatility of a portfolio of selected stocks of companies believed to have market and economic characteristics similar to its own. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. Due to a lack of historical exercise data, the Company estimates the expected life of its outstanding stock options using the simplified method specified under Staff Accounting Bulletin Topic 14.D.2 for awards without market conditions. Defi ned Contribution Plan The Company sponsors a 401(k) plan for its ProKidney-US employees and a defined contribution plan for its ProKidney-KY employees. Full-time employees are eligible to participate in these plans. The Company matches 50% of participating ProKidney-US employees’ contributions up to 8% of salary and contributes 7% of ProKidney-KY employee salaries to the respective plans. The Company’s cost related to these defined contribution plans were $ 503,000 , $ 267,000 and $ 169,000 for the years ended December 31, 2023, 2022 and 2021 , respectively . Segments The Company operates in only one segment. Note 3: Investments Cash equivalents and marketable securities are measured at fair value and within Level 2 in the fair value hierarchy, because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value. The following tables summarize our cash equivalents and marketable securities measured at fair value on a recurring basis as of December 31, 2023 (in thousands): F- 15 Fair Value Hierarchy Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash Equivalents Marketable Securities Money market funds Level 2 $ 4,450 $ – $ – $ 4,450 $ 4,450 $ – Time deposits Level 2 23,628 73 – 23,701 330 23,371 Commercial paper Level 2 126,307 143 ( 28 ) 126,422 996 125,426 Government bonds Level 2 23,014 15 ( 13 ) 23,016 – 23,016 Corporate debt securities Level 2 132,323 314 ( 7 ) 132,630 2,142 130,488 Total $ 309,722 $ 545 $ ( 48 ) $ 310,219 $ 7,918 $ 302,301 The following table shows the fair value of the Company’s cash equivalents and marketable securities, by contractual maturity, as of December 31, 2023 (in thousands): December 31, 2023 Due in 1 year or less $ 310,210 Due in 1 year through 5 years – Total $ 310,210 The following table shows fair values and gross unrealized losses recorded to accumulated other comprehensive loss, aggregated by category and the length of time that individual securities have been in a continuous loss position as of December 31, 2023 (in thousands): Less than 12 months 12 Months or Greater Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Time deposits $ – $ – $ – $ – $ – $ – Commercial paper 52,783 ( 28 ) – – 52,783 ( 28 ) Government bonds 9,986 ( 13 ) – – 9,986 ( 13 ) Corporate debt securities 16,078 ( 7 ) – – 16,078 ( 7 ) Total $ 78,847 $ ( 48 ) $ – $ – $ 78,847 $ ( 48 ) The Company holds debt securities of companies with high credit quality and has determined that there was no material change in the credit risk of its debt securities during the year ended December 31, 2023 . As such, the Company has no t recognized an allowance for credit losses related to marketable debt securities during the years ended December 31, 2023, 2022 and 2021 . Note 4: Income Taxes ProKidney is considered to be an exempted Cayman Islands company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. The Company’s subsidiary, PKLP, is organized as a limited partnership and is classified as a partnership for U.S. income tax purposes, and as such, only records a provision for federal and state income taxes on its subsidiaries organized as C corporations or which have elected to be treated as corporations for U.S. federal income tax purposes. The Company’s subsidiaries, ProKidney-US and ProKidney Acquisition Company, are treated as a C corporation, and therefore a provision for federal and state taxes has been recorded. The Company’s subsidiary, ProKidney-KY, has been granted, by the Government in Council of the Cayman Islands, tax concessions under an undertaking certificate exempting it from any tax levied on profits, income, gains or appreciations in relation to its operations or in the nature of estate duty or inheritance tax for a period of twenty years from January 20, 2016. ProKidney-KY elected to be treated as an entity disregarded from its owner for U.S. tax purposes, and as a result, it has not recorded an income tax provision. The provision for income tax expense consisted of the following for the years ended December 31, 2023, 2022 and 2021 (in thousands): F- 16 December 31, 2023 December 31, 2022 December 31, 2021 Current: Federal $ 5,918 $ 896 $ 72 State 78 – ( 34 ) Total current income tax expense 5,996 896 38 Deferred: Federal – – – State – – – Total deferred income tax expense (benefit) – – – Income tax expense $ 5,996 $ 896 $ 38 The difference between the statutory rate for U.S statutory rate of 21 % and the effective income tax rate was as follows: December 31, 2023 December 31, 2022 December 31, 2021 Current: Income taxes at statutory rate 21.0 % 21.0 % 21.0 % State taxes, net of federal benefit – – – Non-taxed income ( 17.3 ) ( 18.4 ) ( 21.4 ) Federal Credits 1.3 0.8 1.8 Share-based compensation ( 2.2 ) ( 2.4 ) – Change in valuation allowance ( 7.3 ) ( 1.4 ) ( 1.3 ) Other ( 0.1 ) ( 0.2 ) ( 0.2 ) Effective income tax rate ( 4.6 )% ( 0.6 )% 0.1 % Components of the Company’s deferred tax assets and liabilities included in the consolidated balance sheet consisted of the following (in thousands): December 31, 2023 December 31, 2022 Deferred tax assets: Accrued compensation $ 1,302 $ 678 Federal credit carryforwards – 227 Leases 34 10 Share-based compensation 3,163 637 Research and experimental costs capitalized 9,556 3,504 Net operating loss carryforwards 294 – Start-up costs 32 35 Deferred tax assets before valuation allowance 14,381 5,091 Valuation allowance ( 12,888 ) ( 3,332 ) Total deferred tax assets $ 1,493 $ 1,759 Deferred tax liabilities: Intangible assets $ – $ 45 Fixed assets 1,481 1,708 Prepaid expenses 12 6 Total deferred income tax liabilities 1,493 1,759 Net deferred tax asset $ – $ – As discussed in Note 6, the Company is party to a tax receivable agreement with a related party which provides for the payment by the Company to holders of PKLP prior to the Closing (“Closing ProKidney Unitholders”) of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that the Company actually realizes (or, in some circumstances, the Company is deemed to realize) as a result of certain transactions. As no transactions have occurred which would trigger a liability under this agreement, the Company has not recognized any liability related to this agreement as of December 31, 2023. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled F- 17 reversal of deferred tax liabilities, available taxes in the carryback periods, projected future taxable income and tax planning strategies in making this assessment. Accordingly, management has concluded that it is not more likely than not that it will recognize the deferred tax assets, and the Company has provided a valuation allowance of $ 12,888,000 and $ 3,332,000 , respectively for December 31, 2023 and 2022, to offset the net deferred tax assets. The Company has net operating loss carryforwards of $ 1,278,000 that for federal purposes have an indefinite life and for state income tax purposes begin to expire in 2038. A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the years ended December 31, 2023 and 2022 consisted of the following (in thousands): December 31, 2023 December 31, 2022 Unrecognized tax benefits (gross): Benefits at the beginning of the year $ 311 $ 180 Increase related to prior year tax positions 28 9 Decrease related to prior year tax positions – – Increase related to current year tax positions 229 122 Benefits at the end of the year $ 568 $ 311 There were no net unrecognized tax benefits as of December 31, 2023 which, if recognized, would affect our effective tax rate. We expect none of the gross unrecognized tax benefits will decrease within the next year. Tax years 2020 through 2023 remain subject to examination by federal and state authorities. Note 5: Leases In February 2016, the FASB issued ASU 2016-02: Leases (Topic 842). This ASU requires a lessee to recognize a right-of-use asset and a lease liability on its balance sheet for most operating leases. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018, including interim periods within those fiscal years. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides companies with an additional optional transition method to apply the new standard to leases in effect at the adoption date through a cumulative effect adjustment. The Company adopted the new lease standard as of January 1, 2021 using the modified retrospective transition method. The Company elected the package of practical expedients referenced in ASU 2016-02, which permits companies to retain original lease identification and classification without reassessing initial direct costs for existing leases. The Company also elected the practical expedient that exempts leases with an initial lease term of twelve months or less, as well as the practical expedient that allows companies to select, by class of underlying asset, not to separate lease and non-lease components. Adoption of this standard resulted in the recognition of a right-of-use asset and a lease liability on the Company’s January 1, 2021 Consolidated Balance Sheet of $ 1,560,000 and $ 1,559,000 , respectively. There was no material impact on the Company’s Consolidated Statement of Operations and Comprehensive Loss. The Company has operating leases for real estate (primarily office space) and certain equipment with various expiration dates. The Company also has finance leases for certain equipment which are not considered material. For the years ended December 31, 2023, 2022 and 2021, the Company’s operating lease cost was $ 1,062,000 , $ 551,000 , and $ 434,000 , respectively. During the year ended December 31, 2023 , cash paid for operating leases was $ 774,000 . F- 18 The following table summarizes the classification of operating and finance lease assets and obligations in the Company's Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022 (in thousands): December 31, 2023 December 31, 2022 Operating leases: Right of use assets $ 4,116 $ 2,285 Operating lease liabilities, current $ 751 $ 458 Operating lease liabilities, noncurrent 3,506 1,858 Total operating lease liabilities $ 4,257 $ 2,316 Finance leases: Right of use assets $ 147 $ 71 Finance lease liabilities, current $ 52 $ 35 Finance lease liabilities, noncurrent 104 48 Total finance lease liabilities $ 156 $ 83 Maturities of lease liabilities for the Company’s operating and finance leases are as follows as of December 31, 2023 (in thousands): Operating Leases Finance Leases Total 2024 $ 1,144 $ 62 $ 1,206 2025 1,247 32 1,279 2026 1,326 22 1,348 2027 1,002 22 1,024 2028 608 22 630 Thereafter 49 22 71 Total lease payments 5,376 182 5,558 Less: imputed interest ( 1,119 ) ( 26 ) ( 1,145 ) Present value of lease liabilities $ 4,257 $ 156 $ 4,413 The weighted average remaining lease term for operating leases is 4.2 years, and 4.6 years for the finance lease. The weighted average discount rate is 10.2 % and 6.5 % for operating and finance leases, respectively. Note 6: Related Party Transactions Exchange Agreement On the Closing Date, the Company entered into an exchange agreement with PKLP and certain Closing ProKidney Unitholders (the “Exchange Agreement”) pursuant to which, subject to the procedures and restrictions therein, from and after the waiver or expiration of any contractual lock-up period (including pursuant to the Lock-Up Agreement (as defined below)) the holders of Post-Combination ProKidney Common Units as defined in the Exchange Agreement (or certain permitted transferees thereof) would have the right from time to time at and after 180 days following the Closing to exchange their Post-Combination ProKidney Common Units and an equal number of Class B ordinary shares of the Company on a one-for-one basis for Class A ordinary shares of the Company (the “Exchange”); provided, that, subject to certain exceptions, the Company, at its sole election, subject to certain restrictions, may, other than in the case of certain secondary offerings, instead settle all or a portion of the Exchange in cash based on a volume weighted average price (“VWAP”) of a Class A ordinary share. The Exchange Agreement provides that, as a general matter, a holder of Post-Combination ProKidney Common Units will not have the right to exchange Post-Combination ProKidney Common Units if the Company determines that such exchange would be prohibited by law or regulation or would violate other agreements with the Company and its subsidiaries to which the holder of Post-Combination ProKidney Common Units may be subject, including the Second Amended and Restated ProKidney Limited Partnership Agreement and the Exchange Agreement. Lock-Up Agreement On the Closing Date, the Company, SCS Sponsor III LLC and certain Closing ProKidney Unitholders entered into a lock-up agreement (the “Lock-Up Agreement”). The Lock-Up Agreement contains certain restrictions on transfer with respect to the SCS F- 19 Sponsor III LLC and the Closing ProKidney Unitholders party thereto. Such restrictions began at the Closing and would end on the earlier of (i) the date that is 180 days after the Closing and (ii)(a) for 33% of the Lock-Up Shares (other than the Earnout Shares and the Private Placement Shares), the date on which the last reported sale price of a Class A ordinary share of the Company equals or exceeds $12.50 per share for any 20 trading days within any 30-trading day period commencing at least 30 days after the Closing and (b) for an additional 50% of the Lock-Up Shares (other than the Earnout Shares and the Private Placement Shares (as each such term is defined in the Lock-Up Agreement)), the date on which the last reported sale price of a Class A ordinary share of the Company equals or exceeds $15.00 per share for any 20 trading days within any 30-trading day period commencing at least 30 days after the Closing. Notwithstanding the above, (i) the lock-up period for any Earnout Shares will expire not earlier than 180 days after such Earnout Shares are issued ; (ii) 50% of the Lock-Up Shares held by certain Closing ProKidney Unitholders and their affiliates will remain locked up until the earlier of four years following the Closing and the date that PKLP receives notice of any regulatory market authorization, including full or conditional authorization, to market its lead product candidate, Renal Autologous Cell Therapy (but, in any event, not earlier than 180 days following the Closing or (in the case of Earnout Shares) the date of issuance); and (iii) the lock-up period for the Private Placement Shares expired 30 days after the Closing. The restrictions on transfer set forth in the Lockup Agreement are subject to customary exceptions. During January 2023, the lock-up period for 50 % of the shares held by the Closing ProKidney Unitholders (other than the Earnout Shares) expired. Tax Receivable Agreement On the Closing Date, the Company entered into a tax receivable agreement (the “Tax Receivable Agreement”) with the Closing ProKidney Unitholders. Pursuant to the Tax Receivable Agreement, among other things, the Company will be required to pay the Closing ProKidney Unitholders party thereto 85 % of certain tax savings recognized by the Company, if any, as a result of the increases in tax basis attributable to exchanges by the Closing ProKidney Unitholders of Post-Combination ProKidney Common Units for Class A ordinary shares of the Company or, subject to certain restrictions, cash, pursuant to the Exchange Agreement and certain other tax attributes of PKLP and tax benefits related to entering into the Tax Receivable Agreement. Earnout Rights At the Closing, certain shareholders were issued an aggregate of 17,500,000 Earnout Restricted Common Units and 17,500,000 Earnout Restricted Stock Rights (collectively, the “Earnout Rights”). The Earnout Rights vest in three equal tranches if, during the five-year period after Closing, the VWAP of a Class A ordinary share reaches $ 15.00 per share, $ 20.00 per share and $ 25.00 per share. Likewise, the Earnout Rights will vest upon a change of control with a per share price exceeding those same VWAP thresholds within a five-year period immediately following the Closing. Upon vesting, the Earnout Rights will automatically convert into Post Combination ProKidney Common Units and Class B ordinary shares. Related Party Debt On January 18, 2022, in connection with the execution of the Business Combination Agreement, the Company entered into the Promissory Notes. Through such promissory notes, the holders could fund up to $ 100,000,000 to support the operational financing needs of the Company prior to the Closing. These notes bore interest at a rate of 3 % per annum and were due upon the earliest of either (i) the date on which the Business Combination closed or (ii) January 17, 2023. Drawdowns on the Promissory Notes could be made in multiples of $ 10,000 unless otherwise agreed upon. Once an amount was drawn down under the Promissory Notes, it was no longer available for future drawdown requests even if prepaid. During the year ended December 31, 2022, the Company borrowed $ 35,000,000 under the Promissory Notes. During the year ended December 31, 2022, the Company recognized interest expense of $ 207,000 , respectively related to the Promissory Notes. The amounts due under the Promissory Notes were paid, and the Promissory Notes were effectively terminated upon Closing as described in Note 1. Consulting Services Agreement between ProKidney-KY and Nefro Health On January 1, 2020, ProKidney-KY (formerly known as inRegen) entered into a consulting services agreement with Nefro Health (“Nefro”), an Irish partnership controlled and majority-owned by Mr. Pablo Legorreta, a director of the Company, pursuant to which Nefro provides consulting services for the research and development of the Company’s product candidates, including the conduct of clinical trials in North America and the European Union, the design and manufacturing of ProKidney’s product candidates as well as pre-commercialization activities. Under the agreement, Nefro receives $ 25,000 per quarter and is reimbursed for any out-of-pocket expenses incurred in connection with activities Nefro conducted under the agreement. ProKidney-KY has paid Nefro an aggregate of $ 100,000 for each of the years ended December 31, 2023, 2022 and 2021. The initial term of the consulting services F- 20 agreement continued through December 31, 2020 and was renewed pursuant to the provision allowing for automatic renewals for additional periods of one year each unless terminated by either party by providing written notice to the other party at least ninety (90) days prior to the scheduled termination date. Either party may terminate this agreement upon the occurrence of a material breach by the other party in the performance of its obligations under the agreement or in respect of any provision, representation, warranty or covenant if such breach has not been cured within thirty (30) days after receiving written notice from the non-breaching party. Additionally, either of the parties may terminate the consulting services agreement for any reason upon giving thirty (30) days’ advance notice of such termination to the other party. In the event of such termination, ProKidney-KY will be obligated to pay Nefro any earned but unpaid consulting fee as of the termination date. Consulting Services Agreement between ProKidney-US and Nefro Health On January 1, 2020, ProKidney-US (formerly known as Twin City Bio, LLC) entered into a consulting services agreement with Nefro, pursuant to which Nefro provides consulting services for the research and development of the Company’s product candidates, including the conduct of clinical trials in North America and the European Union, the design and manufacturing of the Company’s product candidates as well as pre-commercialization activities. Under the agreement, Nefro receives $ 25,000 per quarter and is reimbursed for any out-of-pocket expenses incurred in connection with activities Nefro conducted under the agreement. ProKidney-US has paid Nefro an aggregate of $ 100,000 for each of the years ended December 31, 2023, 2022 and 2021 . The initial term of the consulting services agreement continued through December 31, 2020 and was renewed pursuant to the provision allowing for automatic renewals for additional periods of one year each unless terminated by either party by providing written notice to the other party at least ninety (90) days prior to the scheduled termination date. Either party may terminate this agreement upon the occurrence of a material breach by the other party in the performance of its obligations under the agreement or in respect of any provision, representation, warranty or covenant if such breach has not been cured within thirty (30) days after receiving written notice from the non-breaching party. Additionally, either of the parties may terminate the consulting services agreement for any reason upon giving thirty (30) days’ advance notice of such termination to the other party. In the event of such termination, ProKidney-US will be obligated to pay Nefro any earned but unpaid consulting fee as of the termination date. Note 7: Redeemable Noncontrolling Interest The Company is subject to the Exchange Agreement with respect to the Post-Combination ProKidney Common Units representing the outstanding 73.8 % noncontrolling interest in PKLP (see Note 1). The Exchange Agreement requires the surrender of an equal number of Post-Combination ProKidney Common Units and Class B ordinary shares for (i) Class A ordinary shares on a one-for-one basis or (ii) cash (based on the fair market value of the Class A ordinary shares as determined pursuant to the Exchange Agreement), at the Company’s option (as the managing member of PKLP), subject to customary conversion rate adjustments for share splits, share dividends and reclassifications. The exchange value is determined based on a five-day VWAP of the Class A ordinary shares as defined in the Exchange Agreement, subject to customary conversion rate adjustments for share splits, share dividends and reclassifications. The redeemable noncontrolling interest is recognized at the higher of (1) its initial fair value plus accumulated earnings/losses associated with the noncontrolling interest or (2) the redemption value as of the balance sheet date. At December 31, 2023 , the redeemable noncontrolling interest was recorded based on its initial fair value plus accumulated losses associated with the noncontrolling interest as this amount was higher than the redemption value as of the balance sheet date which was approximately $ 336,145,000 . Changes in the Company’s ownership interest in PKLP while the Company retains its controlling interest in PKLP are accounted for as equity transactions, and the Company is required to adjust noncontrolling interest and equity for such changes. The following is a summary of net income attributable to the Company and transfers to noncontrolling interest: F- 21 For the Year Ended December 31, 2023 For the Period from July 11, 2022 through December 31, 2022 Net loss available to Class A ordinary shareholders $ ( 35,468 ) $ ( 14,400 ) (Increase)/Decrease in ProKidney Corp. accumulated deficit for impact of subsidiary equity-based compensation 7,005 6,150 (Increase)/Decrease in ProKidney Corp. additional paid-in capital for exchange of Common Units in ProKidney LP for Class A ordinary shares ( 9,500 ) – (Increase)/Decrease in ProKidney Corp. additional paid-in capital for vesting of Restricted Common Units in ProKidney LP ( 4,795 ) ( 321 ) Change from net loss available to Class A ordinary shareholders and change in ownership interest in ProKidney LP $ ( 42,758 ) $ ( 8,571 ) Note 8: Shareholders’ Equity In conjunction with the Business Combination, 186,500,000 Class A Units and 27,100,937 Class B and B-1 Units of PKLP were converted into an aggregate of 170,723,961 Class B ordinary shares of the Company and 9,276,039 Restricted Stock Rights in the Company (the “Restricted Stock Rights”). Subsequent to the Business Combination, the Company’s authorized share capital consists of 1,005,000,000 shares including (i) 500,000,000 Class A ordinary shares, par value $ 0.0001 per share, (ii) 500,000,000 Class B ordinary shares, par value $ 0.0001 per share and (iii) 5,000,000 preference shares, par value $ 0.0001 per share. Rights of Class A Ordinary Shares Each holder of Class A ordinary shares is entitled to one vote for each Class A ordinary share held of record by such holder on all matters on which shareholders generally are entitled to vote. Subject to preferences that may be applicable to any outstanding preference shares, the holders of Class A ordinary shares are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board out of funds legally available therefor. All dividends are subject to certain restrictions under Cayman Islands law, namely that we may only pay dividends out of profits or share premium account, and provided always that, in no circumstances may a dividend be paid if this would result in us being unable to pay our debts as they fall due in the ordinary course of business. In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of the Company’s Class A ordinary shares are entitled to share ratably in all assets remaining after payment of our debts and other liabilities, subject to prior distribution rights of preference shares or any class or series of shares having a preference over the Company’s Class A ordinary shares, then outstanding, if any. Rights of Class B Ordinary Shares Each holder of the Company’s Class B ordinary shares is entitled to one vote for each Class B ordinary share held of record by such holder on all matters on which shareholders generally are entitled to vote. The holders of the Company’s Class B ordinary shares will not participate in any dividends declared by our board of directors. In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of our Class B ordinary shares are entitled to a ratable amount equal to the capital paid up on such Class B ordinary shares of all assets remaining after payment of our debts and other liabilities, subject to prior distribution rights of preference shares or any class or series of shares having a preference over the Company’s Class B ordinary shares, then outstanding, if any. The Company’s Class B ordinary shares shall not carry any other right to participate in our profits or assets. Earnout Rights At the closing of the Business Combination, certain shareholders were issued an aggregate of 17,500,000 Earnout Rights. The Earnout Rights vest in three equal tranches if, during the five-year period after Closing, the VWAP of a Class A ordinary share reaches $ 15.00 per share, $ 20.00 per share and $ 25.00 per share. Likewise, the Earnout Rights will vest upon a change of control with F- 22 a per share price exceeding those same VWAP thresholds within a five-year period immediately following the Closing. Upon vesting, the Earnout Rights will automatically convert into Post-Combination ProKidney Common Units and Class B ordinary shares. The issuance of the Earnout Rights was accounted for as an equity transaction. Since the Earnout Rights were issued to Closing ProKidney Unitholders (i.e., the accounting acquirer in the business combination), the accounting for the Earnout Rights arrangement does not fall under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations nor Topic 718, Stock Compensation. The accounting for the Earnout Rights was also evaluated under ASC Topic 480, Distinguishing Liabilities from Equity, to determine if the arrangement should be classified as a liability. Based on that analysis, it was determined that the Earnout Rights did not meet the criteria to be accounted for as a liability. Additionally, the Earnout Rights were evaluated under ASC Topic 815, Derivatives. As part of that analysis, it was determined that the Earnout Rights met the definition of a derivative; however, they meet the scope exception criteria as they were clearly and closely related to the entity’s own stock, and met the criteria for equity treatment. Note 9: Net Loss per Share Basic net loss per share is calculated by dividing net loss attributable to Class A ordinary shareholders by the weighted-average shares of Class A ordinary shares outstanding without the consideration for potential dilutive securities. Diluted net loss per share represents basic net loss per share adjusted to include the effects of all potentially dilutive shares. Diluted net loss per share is the same as basic loss per share for all periods as the inclusion of potentially issuable shares would be antidilutive. The Company analyzed the calculation of net loss per share for periods prior to the Business Combination on July 11, 2022 and determined that it resulted in values that would not be meaningful to the users of the consolidated financial statements, as the capital structure completely changed as a result of the Business Combination. Therefore, net loss per share information has not been presented for periods prior to the Business Combination. The basic and diluted net loss per share attributable to Class A ordinary shareholders for the year ended December 31, 2022, as presented on the consolidated statements of operations, represents only the period after the Business Combination to December 31, 2022. The following table sets forth the computation of basic and diluted net loss per share for the year ended December 31, 2023 and the period from July 11, 2022 through December 31, 2022 (in thousands, except share and per share amounts): Year Ended December 31, Period from July 11, 2022 through December 31, 2023 2022 Numerator Net loss $ ( 135,447 ) $ ( 54,503 ) Less: Net loss attributable to noncontrolling interests ( 99,979 ) ( 40,103 ) Net loss available to Class A ordinary shareholders of ProKidney Corp., basic and diluted $ ( 35,468 ) $ ( 14,400 ) Denominator Weighted average Class A ordinary shares or ProKidney Corp. outstanding, basic and diluted 61,714,225 61,540,231 Net loss per Class A Unit Net loss per Class A ordinary share of ProKidney Corp., basic and diluted $ ( 0.57 ) $ ( 0.23 ) As of December 31, As of December 31, 2023 2022 Antidilutive securities ProKidney Corp. Class B ordinary shares 168,297,916 171,578,320 Unvested Restricted Stock Rights 3,565,753 8,369,796 Earnout Rights 17,500,000 17,500,000 Legacy SCS Restricted Share Units – 50,000 Stock options granted under the 2022 Equity Incentive Plan 14,680,109 9,504,715 Note 10: Equity Based Compensation F- 23 2022 Incentive Equity Plan On July 11, 2022, the shareholders of the Company approved the ProKidney Corp. 2022 Incentive Equity Plan (the “2022 Plan”) which provides for the issuance of equity based awards to the Company’s employees, non-employee directors, individual consultants, advisors and other service providers. As of December 31, 2023, there were 35,809,951 Class A Ordinary Shares reserved for issuance. The 2022 Plan provides for the issuance of equity awards in the form of incentive stock options, which are intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, or nonqualified stock options, which are not intended to meet those requirements, stock appreciation rights, restricted stock, restricted stock units, performance awards or other cash or stock-based awards as determined appropriate by the plan administrator. In settlement of its obligations under this plan, the Company will issue new Class A ordinary shares. The Company has issued incentive and non-qualified stock option awards under the 2022 Plan to certain employees and non-employee directors of the Company. Given that the Company has established a full valuation allowance against its deferred tax assets, the Company has recognized no tax benefit related to these awards. Time-Vested Awards The Company uses the Black-Scholes option pricing model to calculate the fair value of time-vested stock options granted. These awards generally vest ratably over a three or four-year period and the option awards expire after a term of ten years from the date of grant. The fair value of stock options granted was estimated using the following assumptions during the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 Expected volatility 81.5 % - 84.0 % 82.0 % - 85.0 % Expected life of options, in years 5.2 - 6.1 5.9 - 6.1 Risk-free interest rate 3.5 % - 4.7 % 3.7 % - 4.4 % Expected dividend yield 0.0 % 0.0 % The following table summarizes the activity related to the Company’s time-vested stock option awards granted under the 2022 Plan for the year ended December 31, 2023: Number of Shares Weighted Average Exercise Price Time-vested options outstanding at January 1, 2023 5,865,108 $ 10.30 Granted 12,487,143 7.09 Forfeited ( 3,672,142 ) 9.27 Time-vested options outstanding at December 31, 2023 14,680,109 $ 7.83 Time-vested options exercisable at December 31, 2023 2,486,766 $ 9.75 Weighted average remaining contractual life 7.5 years Time-vested options vested and expected to vest at December 31, 2023 14,680,109 $ 7.83 Weighted average remaining contractual life 8.6 years For the year ended December 31, 2023 , the Company recognized $ 23,643,000 of compensation expense related to time-vested awards under the 2022 Plan. As of December 31, 2023 , the Company had total unrecognized stock-based compensation expense of approximately $ 55,755,000 related to the time-vested grants under the 2022 Plan, which is expected to be recognized on a straight-line basis over a weighted average period of 3.2 years. The weighted average grant date fair value for the option grants during the year ended December 31, 2023 was $ 5.14 . The aggregate intrinsic value of the in-the-money time-vested awards outstanding as of December 31, 2023 was $ 640,000 . The aggregate intrinsic value of the in-the-money time-vested awards exercisable as of December 31, 2023 was a de minimis amount. Market-Vested Awards During the year ended December 31, 2022, the Company also granted to its prior Chief Executive Officer 3,639,607 options with an exercise price of $ 10.33 . This grant contains both time and market based vesting conditions. The market conditions become satisfied in equal one-third tranches upon the Company's Class A ordinary shares exceeding a volume weighted average price hurdle F- 24 of $ 15.00 , $ 20.00 and $ 25.00 , respectively, for 20 trading days within any 30 consecutive trading day period occurring prior to July 11, 2027. Once the market condition for a tranche is satisfied, such tranche will continue to be subject to time-vesting conditions and will vest ratably on each of the first, second and third anniversaries of the date that such tranche satisfied the performance vesting condition described above. Due to the market condition included in this grant, the Company used the Geometric Brownian Motion/Monte Carlo model to value these awards. The model used the following inputs: Expected volatility 96 % Suboptimal exercise multiple 2.80 Risk-free interest rate 4.2 % Expected dividend yield 0.0 % Upon the termination of employment of the prior Chief Executive Officer in 2023, the compensation cost that had previously been recognized related to these awards was reversed. This resulted in the reversal of approximately $ 2,172,000 of total cost during the year ended December 31, 2023. The weighted average grant date fair value for the option grants during the year ended December 31, 2022 was $ 7.75 . No such awards were granted during the year ended December 31, 2023. Legacy Profits Interests The Deed for the Establishment of a Limited Partnership of ProKidney LP, dated as of August 5, 2021 (the “Limited Partnership Agreement”) which replaced the Amended and Restated Limited Liability Company Agreement of ProKidney LLC as the governing document of the parent entity in the Company, allowed for the issuance of Profits Interests (as defined in the Limited Partnership Agreement) to employees, directors, other service providers of the Company and others denominated in the form of one or more Class B Units of PKLP (as defined in the Limited Partnership Agreement). Under the Limited Partnership Agreement, ProKidney GP Limited, the former general partner of PKLP (“Legacy GP”), determined the terms and conditions of the Profits Interests issued. The threshold value assigned to each grant was not to be less than the fair market value of PKLP on the date of grant. Profits Interests awards would vest at a rate of 25% on the latter of the first anniversary of employment and the first anniversary of the Acquisition Date with the remaining 75% to vest in increments of 25% on each anniversary following the first anniversary date, ratably over a three or four-year period from the date of grant, in annual installments of 33.3% over the three-year period from the date of grant, in increments of 6.25% each calendar quarter following the first anniversary date, or were fully vested upon issuance. On January 17, 2022, PKLP amended and restated its Limited Partnership Agreement (the “Amended and Restated Limited Partnership Agreement”) which provided that certain qualified distribution events would result in holders of Profits Interests receiving disproportionate distributions from PKLP until each such holder’s valuation threshold had been reduced to zero in order to “catch up” such holder’s distributions to its pro rata share of aggregate cumulative distributions, and once sufficient distributions to a holder of Profits Interests had been made in accordance with the foregoing, the associated Class B Units of PKLP would automatically be converted into Class A Units of PKLP. Upon consummation of the Business Combination discussed in Note 1, PKLP’s existing Class B and B-1 Units were “caught up” and were converted into Class A Units of PKLP. The resulting vested and unvested Class A Units of PKLP were then recapitalized into Post-Combination ProKidney Common Units or Restricted Common Units of the Company, respectively. This recapitalization resulted in a decrease in the number of awards held by each participant. As such, the number of Profits Interests and related per unit values within these financial statements have been adjusted to reflect this recapitalization. Upon recapitalization, the Restricted Common Units maintained the vesting schedules associated with the original Profits Interest awards. The following table summarizes the activity related to the Company’s Profits Interest awards for the year ended December 31, 2023: Number of Shares Weighted Average Grant Date Fair Value Unvested awards outstanding at January 1, 2023 8,369,795 $ 7.08 Vested ( 2,266,101 ) 6.47 Forfeited ( 2,537,941 ) 7.45 Unvested awards outstanding at December 31, 2023 3,565,753 $ 7.23 As of December 31, 2023 , the unrecognized compensation expense related to these awards was $ 32,193,000 . The current weighted average remaining period over which the unrecognized compensation expense is expected to be recognized is 1.9 years. The weighted average grant date fair value of the Profits Interests granted during the year ended December 31, 2022, was $ 7.43 per Class F- 25 B-1 unit, as adjusted for the effects of the recapitalization. There were no Profits Interests granted during the year ended December 31, 2023. The aggregate intrinsic value of the unvested profits interests outstanding at December 31, 2023 was $ 6,347,000 . The aggregate intrinsic value of profits interests vested during December 31, 2023 was $ 20,749,000 . The aggregate intrinsic value of profits interests vested during the period from July 11, 2022 and December 31, 2022 was $ 6,984,000 . Modification to Profits Interest Awards On January 17, 2022, the Limited Partnership Agreement was amended and restated to provide that certain qualified distribution events would result in the holders of Profits Interests receiving disproportionate distributions from PKLP until each such holder’s threshold value was reduced to zero in order to “catch up” such holder’s distributions to its pro rata share of aggregate cumulative distributions, and once sufficient distributions to a holder of Profits Interests had been made in accordance with the foregoing, the associated Class B Units would automatically be converted into Class A Units. This amendment constituted a modification to the Class B-1 Units in PKLP outstanding as of the date of the modification under the provisions of ASC Topic 718. In connection with the modification of its outstanding share-based compensation awards, the Company will recognize total additional compensation expense of $ 5,437,000 related to awards granted to its employees. The portion of this additional compensation expense attributable to vested awards of $ 3,715,000 was recognized immediately upon modification during the year ended December 31, 2022. During the year ended December 31, 2023, the Company also modified the vesting terms of outstanding time-based stock options issued to certain personnel upon their separation. This amendment constituted a modification of the awards under the provisions of ASC Topic 718 and resulted in the recognition of an additional $ 3,011,000 of compensation expense during the year ended December 31, 2023. Issuance of Profits Interests to Service Provider During the year ended December 31, 2022, the Company issued 2,253,033 fully vested Class B-1 Units in PKLP to a third-party service provider as payment for research and development services provided in prior periods. The Company had previously recognized expense of $ 2,502,000 for these services based on the liability related to the services incurred. As the fair value of shares issued to satisfy that obligation was higher than the amount previously expensed, the Company recognized additional research and development expense of $ 14,080,000 during the year ended December 31, 2022 . Purchase of Class B-1 Units in PKLP Certain of the Company’s employees, board members and service providers purchased 6,648,353 of Class B-1 Units in PKLP for total cash proceeds of $ 6,050,000 , respectively, during the year ended December 31, 2022. Since these Class B-1 Units in PKLP were fully vested upon purchase and contained no service requirements, the Company immediately recognized the difference between the purchase price and the estimated fair value for these Class B-1 Units in PKLP of $ 34,254,000 as equity-based compensation expense during the year ended December 31, 2022. No such sales occurred during the years ended December 31, 2023 or 2021. Fair Value Estimate for Profits Interest Prior to the Business Combination, PKLP was privately held with no active public market for its equity instruments. Therefore, for financial reporting purposes, management determined the estimated per share fair value of PKLP’s equity shares (including Profits Interests) using contemporaneous valuations. These contemporaneous valuations were done using methodologies consistent with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation , also known as the Practice Aid. For the Profits Interest Awards granted during the year ended December 31, 2022, the valuation approach utilized a hybrid method which consists of a combination of an Option Pricing Method (“OPM”) and a Probability Weighted Expected Return Method (”PWERM”) approach. Weighting allocations were assigned to the OPM and PWERM methods based upon the expected likelihood of possible future liquidity events, including the Business Combination. Under the OPM approach, the fair value of the total equity of PKLP within each scenario was first estimated using a back-solve method wherein the equity value is derived from a recent transaction in PKLP’s own securities, and then the total equity value is allocated to the various components of the capital structure, including the Profits Interests, using an OPM or a waterfall approach based on the specific rights of each of the equity classes. The OPM used the fair value of the total equity of PKLP within a scenario as a starting point and incorporates assumptions made regarding the expected returns and volatilities that are consistent with the expectations of market participants, and distribution of equity values is produced which cover the range of events that an informed market participant might expect. This process creates a range of equity values both between and within scenarios. The fair value F- 26 measurement is sensitive to changes in the unobservable inputs. Changes in those inputs might result in a higher or lower fair value measurement. The PWERM approach is a scenario-based analysis that estimates the value per share of ordinary shares based on the probability-weighted present value of expected future equity values for the ordinary shares, under various possible future liquidity event scenarios, including the proposed Business Combination, in light of the rights and preferences of each class and series of stock, including the Profits Interests, discounted for a lack of marketability. In performing these valuations, management considered all objective and subjective factors that they believed to be relevant, including management’s best estimate of PKLP’s business condition, prospects, and operating performance at each valuation date. Within the valuations performed, a range of factors, assumptions, and methodologies were used. The significant factors included trends within the industry, the prices at which PKLP sold its Class A Units, the rights and preferences of the Class A Units relative to the Class B Units at the time of each measurement date, the results of operations, financial position, status of research and development efforts, stage of development and business strategy, the lack of an active public market for the units, and the likelihood of achieving an exit event in light of prevailing market conditions. The following reflects the key assumptions used in each of the valuation scenarios: OPM PWERM Total equity value (in thousands) $ 234,551 - $ 280,400 $ 1,750,000 Expected volatility of total equity 95 % 60 % - 90 % Discount for lack of market 30 % 7 % - 15 % Expected time to exit event 3.4 years - 3.7 years 0.1 years - 0.5 years Legacy SCS Awards In 2021, SCS had agreed to grant 50,000 restricted stock units (“RSUs”) to certain of its board members and other advisors which were contingent upon the consummation of a Business Combination and a shareholder approved equity plan. The RSUs were to vest upon the consummation of such Business Combination and represent 50,000 Class A ordinary shares of the Company that will settle on a date determined in the sole discretion of the Company that shall occur between the vesting date and March 15th of the year following the year in which vesting occurs. The RSUs granted by the Company are in the scope of ASC 718. Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The RSUs granted were subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the RSUs is recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance. Upon Closing, the performance conditions for these awards were met as both a Business Combination had occurred and the shareholders approved a qualifying equity plan. As such, the entire amount of share-based compensation expense related to these awards of $ 396,000 was recognized during the year ended December 31, 2022. The weighted average grant date fair value per share of these RSUs was $ 7.92 . Compensation Expense Compensation expense related to share-based awards is included in research and development and general and administrative expense as follows (in thousands): Years Ended December 31, 2023 2022 2021 Research and development $ 15,864 $ 23,711 $ – General and administrative 14,982 50,758 699 Total equity-based compensation expense $ 30,846 $ 74,469 $ 699 Note 11: Subsequent Events In January 2024, the Company entered into an Open Market Sale Agreement SM (“Sales Agreement”) with Jefferies LLC as the sales agent, pursuant to which the Company may offer and sell, from time to time, through Jefferies, shares of its Class A ordinary shares, par value $ 0.0001 per share, having an aggregate offering price of up to $ 100.0 million by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act (the “ATM Offering”). The shares are offered and sold pursuant to the Company’s shelf registration statement on Form S-3. F- 27 In February 2024, the Company issued 1,740,983 Class A ordinary shares in exchange for 1,740,983 Class B ordinary shares and an equal number of Post-Combination ProKidney Common Units. F- 28